Brewing exclusive beer for local account?

[Uncle Puck]

Hello all, working on the final stages of a business plan for a micro/nano on a remote island in Lake Michigan. We currently have about 600 year-round residents, but the tourist/summer residents/vacation home numbers are much larger.

Aside from having a hard time estimating the numbers of customers we'd be likely to have in various seasons, the other challenge is sizing the system so that we have enough capacity in the summer without having to idle the equipment too much in the off season.

That said, the island currently has five bars, only two of which are currently open year-round. One of the seasonal ones is a bar only, but the others are all restaurants with bars. We would initially be opening as a brewery with a taproom, with the possibility of becoming a brewpub at some point.

Oh, and one other thing, two of the bars are adjacent to each other and operated under the same liquor license, because the liquor license for one was transferable and got sold off the island decades ago. Not only that, but the owner of those two also owns two of the others, which means that, yes, out of five bars in town, four are under the same ownership and management. (He partnered with the owners of one to keep it from going under, and ended up taking over when they wanted out. His most recent acquisition was purchased when the owners were contemplating closing because their attempts to sell the successful business had failed. So his monopoly may not be as nefarious as it looks, but it is nearly complete, and a lot of folks would like to see more options and more competition.)

That said, I have investors who are very interested in the project. My question for the moment is actually about competition. Obviously we'll be in competition with the other establishments. While I'd like to have my beer on tap in all five bars, I'd rather have folks come to the taproom than buy it from someone else, all things being equal. So here is my idea: what about offering to develop a signature beer for each of those local accounts? So they get to choose a style of beer, name it, and have it on tap exclusively at their establishment. We wouldn't sell any of those in the taproom, and we wouldn't offer any of our main beers to those establishments. In my mind, that gets our brand out there while allowing each establishment to have something distinctive and locally brewed without cutting into our taproom sales of our main beers. I know keeping up with production, storage, and distribution of particular beers would be a bit of a headache, but as this is really the only distribution we'd be doing initially, it seems like a good way to balance collaboration and competition for the betterment of the island economy as a whole.

Anyone have experience with custom or exclusive beers? It isn't really contract brewing, but kind of like it. The contract would be interesting, I'm sure. Any input would be greatly appreciated. Thanks guys!


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[ProStarter]

Exclusive Brews

You should contact the people at Custom Brewcrafters in Honeoye Falls, NY. Private label beer is the foundation of their business plan. Here's a link to their contact info page:

http://www.cbcraftbrewers.com/hours-get-directions/get-in-touch

Cheers!

Phil Internicola

[Bainbridge]

In a small town you can either be a competitor or a resource. A lot will ride on whether you get along well with the other bars, and whether you hit their bottom-line hard or not. Being a brewery is interesting that way. We have a sports-pub account here that opened last year and immediately siphoned off 2-3 barrels a month from our taproom. But they also buy 2-3 kegs a week from us, so it works out. And we have another large local restaurant account that basically refuses, politely if evasively, to ever put us on tap. I suspect it's because we hit their sales hard. So it's all about playing nice and getting really close with your local accounts.

As a side note, bars that approach me about a bespoke beer often aren't happy when I say "Sure thing, but do you have room for those twenty kegs in your cold room?"

[populuxebrewing]

Which is why I am in a better position than Russel to do exactly this. I have 2 exclusive accounts which I work with, one for a DIPA and the other a Pale Ale. The difference is that I have a 1.5bbl brew house which I can make the beer on. At the end of the day it's not a ton of money, but the beer pays for itself and helps strengthen bonds with accounts. It's also 3 kegs at a time. The DIPA flips about once every 6 weeks, and the Pale just came on so I'm not sure about how fast it'll move. Regardless, the cooperage needs are small enough that I can just hold onto them until they're needed.

As far as everything else in your post, you might want to get comfortable with having some idle equipment in the winter. Look at it as an opportunity. You can make longer beers in the winter, lager something, or get some barrels going. Would you rather be stressed out looking at an empty cold room in the summer, or stressed out looking at empty FVs in the winter? I'd rather have enough beer. Something about leaving money on the table rubs me the wrong way.

[Uncle Puck]

Thanks for the lead, Prostarter! I didn't have the term "private label beer" in my lexicon, but it is what I was reaching for.


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[Uncle Puck]

Populuxe, this is exactly what I was thinking:

"At the end of the day it's not a ton of money, but the beer pays for itself and helps strengthen bonds with accounts."
As Bainbridge said, "you can either be a competitor or a resource." And probably it is about balancing which of those the competition sees you as, generally, and giving them something special like a private label beer might just make a difference.

Also, the storage question is a big one, that it sounds like Populuxe mitigates by keeping the batches of those beers small.

"The DIPA flips about once every 6 weeks, and the Pale just came on so I'm not sure about how fast it'll move. Regardless, the cooperage needs are small enough that I can just hold onto them until they're needed."

-by "flip," do you mean them using up a single keg, or a whole batch? (Sorry, probably a dumb question.)

"You might want to get comfortable with having some idle equipment in the winter. Look at it as an opportunity. You can make longer beers in the winter, lager something, or get some barrels going. Would you rather be stressed out looking at an empty cold room in the summer, or stressed out looking at empty FVs in the winter? I'd rather have enough beer. Something about leaving money on the table rubs me the wrong way."

I much prefer the idea of having too much capacity rather than too little, even with the upfront costs of the system being higher. Our tourist economy has always been feast or famine, and one of the problems is that many businesses stay too small in order to keep costs down and then lose money by being unable to keep up with the summertime demand. The other problem is businesses closing up completely from September to April, so it becomes hard to convince folks to travel here in the fall, winter and spring. So we want to be able to keep up with the demand in the busy season, and keep the doors open throughout the year, though with reduced taproom hours in the winter.

And that extra capacity during the slower time is definitely an opportunity, as long as the investors can stomach the bell curve that is our net income projections. But the folks who are interested in the project seem to be interested in the long-term boost to the island economy that the brewery could be. And having extra capacity will hopefully pay off as things pick up. Right now my projections are with 0% growth for the first ten years, as the number of folks who actually come to the island each year is dependent on a lot of factors outside our control. If we end up with growth early on, great, but I wanted the proforma to show that we can make it work even without regular annual increases in sales.

[populuxebrewing]

Yes, by flip I mean I am brewing that beer about once every 6 weeks. The account goes through a half bbl every other week. They do 12oz pours of it, so not too bad. I just have to make sure to schedule it or else I can get caught out not having yeast. The Pale is much simpler because there's no dry-hopping, but it also cheaper and takes about as much of my time...

[beerguy1]

I think having beer in all 5 is biting off quite a bit especially for the first year of opening. Here is how I would approach it my priority would be my pub and getting beer flowing and providing enough beer to fill my taps take a conservative approach and make 2-3 good beers that you are proud of and serve them in your taproom then rotate a signature and different beer for the others. Our brewery (on the lake huron side) is somewhat seasonal and our first years it was hell trying to keep up with beer for our place as well as doing a few accounts around the area. Your business on Beaver is huge then very very small. Unless you are going to self distribute your beer will have to go back to the distributors then back to the island that is going to mean more kegs,more keg cleaning, all that takes time and that means more time devoted to distribution than to your tap room.

We work very well with the local pubs they all have our beer on tap but we close earlier and do not sell liquor or wine and have no food so we are not taking away some of the customers. Like I said I would worry about my place first then maybe after you are open for a year perhaps you can get taps in 2 places

Cheers
Mike

[Uncle Puck]

Brewing exclusive beer for local account?

Thanks Mike! We plan to stay well under the 1000 bbl/year limit Michigan sets for self distribution, so we would be delivering it ourselves, but your point is taken and appreciated. Probably much better to build a solid business in the taproom, and branch out once we have a feel for the demand and how well we'll be able to keep up with peak season. Out of curiosity, what brewlength did you folks start with? We're thinking 4 bbl with at least one double sized fermenter and one double sized brite tank (along with 2-4 of each at 4 bbl). Theoretically that should allow us to get by with one batch a week, but in reality we'd probably end up doubling up and/or brewing two days a week in the busier half of the year, and possibly brewing every couple weeks in the off season.


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[beerguy1]

Thanks Mike! We plan to stay well under the 1000 bbl/year limit Michigan sets for self distribution, so we would be delivering it ourselves, but your point is taken and appreciated. Probably much better to build a solid business in the taproom, and branch out once we have a feel for the demand and how well we'll be able to keep up with peak season. Out of curiosity, what brewlength did you folks start with? We're thinking 4 bbl with at least one double sized fermenter and one double sized brite tank (along with 2-4 of each at 4 bbl). Theoretically that should allow us to get by with one batch a week, but in reality we'd probably end up doubling up and/or brewing two days a week in the busier half of the year, and possibly brewing every couple weeks in the off season.


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Not quite sure the meaning of brew lenght that you are asking me but if you want to know what size tanks ect we started with 2 15 bbl and 2 30bbl ferms and a 15 and 30 bbl brite. we now have the 2-15,5-30 ferms and 2-30,1-15 and 2-60 bbl brites. Dont forget you will need room for keg,grain storage and keg cleaning areas. Good Luck